The High Court has ordered Lidl Ireland GmbH to disclose a limited set of documents concerning the meaning of a restrictive covenant over its former store in Nenagh, Co Tipperary, in a dispute with the property owner and two tenants.
Mr Justice Barr’s ruling, delivered on 6 September 2019, concerned an application by the second and third defendants for discovery ahead of trial. It did not decide whether the tenants’ sale of food breached the covenant, or whether the covenant was invalid under competition law.
Lidl had owned a shop unit on Martyr’s Road and sold it to Bilo Property Holdings Ltd. Bilo also agreed to sell Lidl a nearby site on McDonagh Street for a new store. The covenant restricted use of the former store for “food retail” and other specified purposes.
The tenants, Centz Store 7 Ltd and Centz Store 9 Ltd, began occupying the former store on 2 May 2019. Lidl alleged they sold food products there in breach of the covenant. During an interim-relief hearing, the parties reached a without-prejudice compromise under which the tenants agreed to stop selling food at the premises pending trial. Lidl is seeking a permanent injunction in the main action.
The tenants argued that documents from negotiations between Lidl and Bilo could help show that the covenant did not cover the limited food products they said they sold. Lidl opposed that request, arguing that subjective intentions and prior negotiations were generally inadmissible when interpreting a written contract.
Justice Barr said evidence of a party’s subjective understanding was inadmissible, but a document recording an agreement between the contracting parties about the scope of a term could help interpret the contract. He ordered Lidl to disclose any hard-copy or electronic document, note or memorandum recording an agreement between Lidl, its servants or agents, and Bilo, its servants or agents, about the meaning or extent of “food retail” as it related to selling food at the former store.
The judge also ordered discovery under category D of the tenants’ notice of motion, which the parties had agreed. The judgment does not describe that category.
He refused discovery under categories E, F, G and H. Category E concerned matters including negotiations over price and the covenant. The judge said those materials were not relevant to the issues as pleaded, given Lidl had abandoned its damages claim except as an alternative if an injunction was not appropriate, and the requested internal discussions would not establish loss. He said practices in other markets were not relevant to the competition-law issue raised by category F. For categories G and H, he found Lidl’s internal views about its market position or the covenant’s value were not relevant or necessary to deciding objectively whether the agreement breached section 4 of the Competition Act 2002.
The dispute over the covenant’s meaning, the alleged breach and the tenants’ competition-law counterclaim remained for the substantive action.